We all know about savings accounts with banks. It allows easy access to our funds while offering security from theft and mishandling. A Demat account does the same for investors. Nowadays, the Demat account is a prerequisite for stock investment.
Demat Account is an account that is used to hold shares and securities in electronic format. The full form of Demat account is a dematerialized account. The purpose of opening a Demat account is to hold shares that have been bought or dematerialized (converted from physical to electronic shares), thus making share trading easy for the users during online trading.
Dematerialization of shares in Nepal started gradually after the formal inauguration of CDS and Clearing on Chaitra17, 2067. In order to open demat account in Nepal, one can go to the company which has got permission from the SEBON for Depository Participant (DP) service. BFIs, Merchant bankers or stock brokers – like Dynamic Money Managers – facilitate these services.
What is Demat account?
A Demat Account or Dematerialized Account provides the facility of holding shares and securities in an electronic format. During online trading, shares are bought and held in a Demat Account, thus, facilitating easy trade for the users. A Demat Account holds all the investments an individual makes in shares, government securities, bonds, dividends and mutual funds in one place.
Demat enabled the digitization process of the Nepalese stock trading market and enforced better governance by SEBON. In addition, the Demat account reduced the risks of storing, theft, damage, and malpractices by storing securities in electronic format. The end-to-end digital process has contributed to popularizing Demat, which skyrocketed in the pandemic.
What is dematerialization?
Dematerialization is the process of converting the physical share certificates into electronic form, which is a lot easier to maintain and is accessible from anywhere throughout the world. An investor who wants to trade online needs to open a Demat with a Depository Participant (DP). The purpose of is to eliminate the need for the investor to hold physical share certificates and facilitating a seamless tracking and monitoring of holdings.
Earlier, the share certificate issuance process was time-consuming and cumbersome, which Demat has helped transform by speeding the entire process and storing security certificates in digital format. Once your Demat account is active, you can convert paper certificates into digital format by submitting all your physical securities along with a Dematerialization Request Form (DRF). Also, remember to deface each physical certificate by mentioning ‘Surrendered for dematerialization’ on it. You will receive an acknowledgement slip when you surrender your share certificates.